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Why Living Trusts are Failing in California (Part 1) 

      Have you ever heard of a situation in which a son or daughter lost their inheritance in a divorce, lawsuit or creditor claim against their spouse?

It happens frequently in community property states like California. Typically, on the death of the surviving parent, a son or daughter will receive his/her inheritance and place it in a joint account or investment fund with their spouse. Under California law, this is considered a gift to the community property estate. Wages may subsequently be co-mingled with the inheritance funds with both spouses having check writing authority on the account or investment fund. This action tends to support the position that the child's inheritance is now community property. If the son-in-law or daughter-in-law files for divorce, they will claim one-half of the account, which includes the former inheritance, as their community property interest. Or if the son-in-law or daughter-in-law has creditor issues or is sued, the child's inheritance could be lost as part of the community property estate.

Amend your Living Trust now to include or update your Trust provisions to protect your child's inheritance from these dangers. For those of you who included these provisions several years ago, you need to contact our office for potential updating of your Living Trust for this asset protection planning.


Blessings to you and your family

-Jack E. Stephens 

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